What is a mortgage?

A mortgage is fundamentally characterized as a long-term bank loan specifically designed for the purpose of purchasing a home or other real estate. This type of financing allows individuals to acquire property without needing to pay the full purchase price upfront. Instead, the borrower makes monthly payments over a specified period, typically ranging from 15 to 30 years, which includes both principal and interest. The property itself serves as collateral for the loan, meaning if the borrower fails to make payments, the lender has the right to take possession of the property through foreclosure.

The concept of a mortgage is distinct from other financial terms. For instance, a short-term bank loan is generally for a much shorter duration and might be used for different purposes, such as personal expenses or business needs. A lease agreement pertains to renting property rather than purchasing it, which is a different arrangement altogether. Additionally, a loan with a fluctuating interest rate usually refers to variable-rate loans, which can change over time based on market conditions, but this does not encapsulate the broader definition of a mortgage. Thus, understanding the specific nature and function of a mortgage clarifies why the correct answer relates to a long-term bank loan for real estate purposes.